Despite the state’s rating agency asking for a 2.6% increase in workers’ compensation rates due to costs related to the coronavirus pandemic, California’s insurance commissioner has instead ordered that benchmark rates be cut 4.6%.
Besides the rate increase, the Workers’ Compensation Insurance Rating Bureau had recommended that all policies be subject to a COVID-19 surcharge that ranged from 1 cent per $100 of payroll for the least risky professions to 26 cents per $100 of payroll for the riskiest (such as health care workers).
Insurance Commissioner Ricardo Lara rejected that filing as well, saying both the request for rate hikes and the surcharges were not borne out by the claims statistics.
“The WCIRB’s thorough efforts to estimate COVID-19 costs are noted and appreciated but I am not persuaded that there is sufficient and reliable data upon which to base an adjustment for COVID-19 costs,” he said in a statement.
The Rating Bureau had made a big deal about the COVID-19 surcharges in anticipation of certain industries being adversely affected by high work-related coronavirus infections. However, overall workplace injuries in California have dropped precipitously since the start of the pandemic and all the fallout has put a major dent in economic activity.
The pandemic has led to an overall 20% decrease in workers’ compensation claims in the state, even though COVID-19 claims surged during the summer months.
Under California law, insurers are not allowed to count COVID-19 claims when calculating employers’ workers’ compensation experience modifiers (X-Mods). Another law extends a presumption that any worker who reports to a workplace and comes down with coronavirus will be eligible for workers’ comp benefits.
Commissioner Lara adopted an average advisory benchmark rate of $1.45 per $100 of employer payroll and adjusted the pure premium rates for individual classifications — excluding additional adjustments for COVID-19 — based on the benchmark rate effective Jan. 1, 2021. That’s compared with the $1.50 average benchmark rate as of Jan. 1, 2020.
The benchmark rate — or pure premium rate — is a base rate that insurers use to price policies. It excludes overhead and profits. The rate is advisory and final rates will vary based on each carrier’s specific rate filing and the individual employer’s claims experience.
Lara also said that if insurers want to include any additional COVID-19-related surcharges on their policies, they will need to clearly identify the adjustments in their rate filings with the Department of Insurance.
Additionally, while rejecting the COVID-19 surcharges, the commissioner’s proposed decision includes a Table of Recommended COVID-19 Additive Adjustment per $100 of Payroll that averages $0.05 per $100 of payroll.